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Dealing with Medical School Debt

The numbers are daunting. Consider these statistics from the Association of American Medical Colleges graduate questionnaire and try not to glaze over and fall off your chair in a fit of depression:

The average educational debt of indebted graduates of the class of 2009 is $156,456.

79 percent of graduates have debt of at least $100,000.

58 percent of graduates have debt of at least $150,000.

Has it always been this way? No. Medical education debt has increased, and is driven by rising tuition, according to the American Medical Association. AAMC data concurs, showing that median private medical school tuition and fees increased by 50 percent (in real dollars) in the 20 years between 1984 and 2004. Median public medical school tuition and fees increased by 133 percent over the same time period, according to the AAMC.

How Bad Is It?

The good news, if there is any, is that nephrology fellows may have slightly less debt than trainees in other fields, according to Mark G. Parker, MD, director of the Division of Nephrology and Transplantation Program, and director of the Nephrology Fellowship Program at Maine Medical Center.

In 2009, Parker worked with colleagues at several institutions and the American Society of Nephrology to survey the current renal fellow ASN membership and learned that, for instance, only 4.9 percent of fellows had an educational debt burden of greater than $200,000, whereas it was reported in the New England Journal of Medicine earlier that year that nearly 25 percent of U.S. medical graduates report this level of debt burden, Parker said.

“ And while 38.4 percent of fellows described little or no educational debt, over 30 percent still described indebtedness in the range of $50,000 to $200,000,” Parker said. “The reasons for this distribution are uncertain, but it’s notable that currently only 40 percent of nephrology fellows are U.S. medical graduates and the nature of a young adult’s financial obligations obviously must, to some degree, reflect socioeconomic background and resources during one’s academic years. Interestingly, when asked why they chose nephrology as a career, only 1 percent of fellows cited ‘earning potential.’”

Parker is not certain that the stress of educational debt or the strategies for managing debt are different for nephrologists than they are for any other young professionals. “In the tenuous economic environment of recent years, I think it may be sensible to utilize the services of a reputable professional financial advisor in order to help one’s short- and long-term personal finance strategies,” Parker said. “Certainly, it should be a high priority to have a plan to pay down one’s pre-existing indebtedness before the additional financial obligations of life (mortgages, cars, children, unanticipated crises, etc.) accumulate. It is clear that ‘credit’ will no longer be extended as liberally as in years past, and that is probably a good thing, but it forces young people embarking on careers and starting families to have a more realistic and prudent approach to ownership and their general purchasing power.”

Consequences

Okay, medical fellows owe a lot of money. But are there ramifications beyond having to wrangle spending the first few years after gradation? Yes, according to Dr. Adam Weinstein, a nephrologist at The Kidney Health Center of Maryland.

“ Having student debt is a huge stress for all physicians, nephrologists included,” Weinstein said. “For those of us that have decided to pursue subspecialty fellowships, the delay in loan repayment can mean hundreds to thousands in deferred interest payments. With between $150,000 to $250,000 in debt, on average, it is like starting your first job with a mortgage payment on top of having delayed your life, family, a real mortgage payment and other asset accumulation (think retirement savings, equity in other investments, etc.).”

Whether debt affects where nephrologists decide to work is debatable. According to Weinstein, heavy debt motivates young nephrologists to aim for a lucrative job, which generally requires moving to a densely populated area.

“ More importantly, physicians often think of choosing to sub-specialize based on differences in pay,” he said. “For instance, for an extra two to four years of training beyond the three years of internal medicine residency, your salary may go up by 15 percent to 40 percent, sometimes more. Despite the delay in debt repayment, this is a strong incentive to not stay in general internal medicine. Especially since the work-life is not all that different amongst the various internal medicine subspecialties.”

Martin Osinski, president of NephrologyUSA, in Miami, Fla., said numerous factors influence the choice of where a nephrologist ends up working. The vast majority of nephrology fellows Osinski has worked with over the years have not used debt repayment as a motivating factor in choosing a position, Osinski said.

“ I believe the fact that the majority of physicians coming out of nephrology fellowships not being U.S. medical school graduates have played a key role in that fact,” he added. “Unless someone feels tremendous stress from the debt and goes out looking specifically for lucrative practices in order to pay them off (I have seen a few), I think most U.S. grad fellows look at the long-term picture, practice potential, place to live, opportunities for spouse and children and time to partnership as more important than how quickly they get their debt paid off.”

Parker agrees. As a fellowship training program director, he has advised graduating fellows about the job market for more than 10 years and does not think educational indebtedness plays a large role in where nephrologists work, either geographically or in terms of practice style.

“ Historically, I think that a proportion of trainees have gravitated to private practice for multiple reasons, with higher earning potential being only one contributing factor,” Parker said. “If anything, the choice of work environment is often determined by other factors—for example, many international medical graduates choose positions that will allow them to fulfill specific visa requirements, in turn presenting the opportunity to remain in the U.S. long-term.

Many other fellows appear to choose positions in locations that are proximate to family, regardless of income level. “It is relevant to this discussion and interesting to me that some authors have actually demonstrated an inverse relationship between educational indebtedness and income potential when medical students and residents make subsequent career choices,” Parker added. “Clearly, other elements of a physician’s disposition and interests weigh heavily in making career and lifestyle choices.”

While nephrologists don’t have as much debt as other specialties have, they also don’t make as much money. Starting nephrology compensation is on the lower 50percentile on the compensation scale and thus is probably more stressful than it may be for a surgeon or cardiologist, Osinski said.

“ It may be on the minds of fellows completing training, however, my experiences with them over the past 26 years does not see it being a major factor in where they choose to practice for the vast majority of graduates,” he said.

What Can Be Done?

Osinski recommends that any loan a student takes should be spread out for as long as possible with no prepayment penalty.

“ Many student loans offer advantageous interest rates so making sure you can afford the payment by stretching it can only help,” Osinski said. “Not being penalized for prepayments will allow you to use future bonuses from practice income to forego this debt sooner than later if you do not have other places to put the money that will pay a higher interest rate.”

Aside from winning the lottery or holding up a bank, the most common option for nephrology grads is old fashioned and frustrating: pay the money back slowly and surely. A compromise between marathon-style repayment and windfalls is to set up a job that will pay a loan as part of the financial package. The only other option is debt restructuring, Weinstein said. “These loan repayment packages are most commonly for physicians who negotiate deals with hospitals and large organizations in rural and under-served communities,” he said.

The opportunity to offer debt relief to newly trained physicians seems like an easy way to shape public policy, Weinstein added. “From federal loan forgiveness to making an interest tax deductible, to giving money to businesses to help subsidize young physicians, there are numerous options that have not been enacted,” he said. “This is ‘low-hanging fruit that is widely discussed in health-policy circles. It is an easy way to sort through some of our workforce problems in terms of subspecialty and primary rural care and the lack of primary care, in general. It is disappointing that our elected officials have not found a way to enact these policies.”

The American Medical Association Medical Student Section has drafted recommendations for legislative and administrative remedies to the medical-education debt crisis. At the federal level, they include securing adequate funding for Title VII health professions programs in the FY 2009 Labor, Health and Human Services, Education and Related Agencies appropriations bill and expanding and protecting the National Health Service Corps (NHSC) Loan Repayment Program, as well as broadening the tax-exempt status of medical scholarships.

State legislative options:

Tuition caps

State tax deductions for loan interest

State service loan repayment programs

Reform of medical school financial policies:

Tuition caps

Increasing grants and scholarships

Collaborate graduate/undergraduate debt counseling

Collective buying to reduce student expenses

For the medical graduate, there are programs that will help manage debt. For instance, the Association of American Medical Colleges has a service on its website that allows doctors to manage and save loan information in one secure location, view and explore loan repayment options, and drafts their own scenarios in a “scratch pad.” To access this service, visit www.aamc.org/services/first/.